How Does a Parent Enrolling in College Affect the Child's Financial Aid?

My 19-year-old is graduating with his Bachelor’s degree in one
week. One of his professors has asked him to pursue a Master’s degree and I am
beginning my law school career at the same time. My son has done
projects for which he has been paid nominal amounts but has never had
a regular (even part-time) job. On the FAFSA we listed him as independent
(according to the FAFSA guidance for grad school) but also indicated that
there are two of us in the household who will be full time students
for the upcoming year. I found no FAFSA guidance on this situation and
I do continue to provide more than half his support. FAFSA has
returned my application for corrections on this question but I have
answered appropriately according to the given definition and
instruction. What is correct? Can you point me to the standard upon
which FAFSA is basing its decision?
— Kim S.

If the FAFSA is for a school year during which your son will be
pursuing a Master’s degree, he will be a graduate student and is
considered independent for that year.

Unless you are considered part of his household (i.e., you
live with him and he provides more than half your support and will
continue providing more than half your support through the end of the
award year), you cannot be counted as part of his family size and thus
cannot be counted in the number in college on his FAFSA. You will need
to correct his FAFSA.

However, he is considered a member of your household on your
own FAFSA if you provide more than half his support and will continue
to do so throughout the award year. If he’s considered a member of
your household, you can count him in the family size and the number in
college figures on your FAFSA. Similar rules apply to counting him in
family size and number in college on the FAFSAs of his siblings.

Note that student aid, including student loans, counts as part of the
student’s own support. So even though he does not work, it is possible
that the student aid he receives exceeds the support you are providing
him. If he is using savings to pay for graduate school or living
costs, that also counts as part of his own support. You will have to
do the math to determine whether you are really providing him with
more than half his support, now and through the end of the award
year. The college may have a support test form that they use to
evaluate whether a parent is providing more than half
support. Dependency status for federal student aid purposes uses a
different definition of support than dependency status for IRS
purposes.

Most college financial aid administrators will question the inclusion
of an independent student in the household size on a parent’s
FAFSA. However, it is possible for a student to be independent on his
own FAFSA and to be included as a dependent on the parent’s FAFSA or
the FAFSA of the student’s sibling, if the parent provides and will
continue to provide more than half support. The rules are not
symmetric.

The student is not required to live with the parent in order to be
counted in family size and number in college on the parent’s
FAFSA. Only the support test is used. (Different rules apply when the
student is being counted in family size and number in college on the
FAFSA of someone other than the student, the student’s spouse or the
student’s parents. In such a circumstance the student must live with
the applicant in addition to receiving more than half support from the
applicant.)

The 2011-12 Federal Student Aid Handbook states on page AVG-30 that
“For children in the household size, the ‘support test’ is used rather
than residency because there may be situations in which a parent
supports a child who does not live with her, such as when the parent
is divorced or separated.” The Federal Student Aid Handbook also
states on page AVG-33 that household size for an independent student
includes “The student’s children, regardless of where they live, if
they will receive more than half of their support from the student
from July 1, 2011, through June 30, 2012.” Similarly, the verification
worksheet for independent students specifies in the family information
section that the student should include “your children, if you will
provide more than half of their support from July 1, 2011 through June
30, 2012, even if they do not live with you.”

The Federal Student Aid Handbook also provides two examples to
illustrate. The first example appears in the margin on page AVG-31:

Dependent student household size example

Lydia is a dependent student, and her parents are married. Her brother
Ron is 26, but his parents still provide more than 50% of his support,
so he is included in the household size. Her sister Elizabeth is
attending college but is an independent student and isn’t supported by
their parents, so she isn’t included in the household size. Her sister
Susan is not attending college, but is working and supporting herself.
However, if Susan were to apply for student aid, she would be
considered a dependent student, so she is included. Therefore, the
household size that Lydia reports for her parents is 5.

The second example appears in the margin on page AVG-33:

Independent student household size example

Eddy is an independent student. He was married, but now he and his
wife have separated. He’s paying child support, but it isn’t enough to
provide more than half his children’s support, so he can’t include his
children in his household size. Eddy’s nephew Chavo lives with him and
gets more than half of his support from Eddy (and will do so for the
award year), so he can be counted in Eddy’s household size, which is 2.

Having just turned 24, Chavo is also independent, and his household
size is 1.

These examples are based on the statutory language in section 481(k)
of the Higher Education Act of 1965 [20 USC 1087vv(k)], which was
added by the Higher Education Technical Amendments of 1993
(P.L. 103-208) effective starting with the 1993-94 award year.

The treatment on the CSS/Financial Aid PROFILE form, which is used by
about 250 colleges for awarding the college’s own financial aid funds,
may differ.